Rebound Rules: lower rates, trim deficit, use PSU cash

India may have escaped the dire effects of the last global economic meltdown in 2008, but a slew of recent data shows that the economy is headed for its worst growth in a decade. What is the way out for a rebound?

Experts have called for immediate measures to turnaround the economy, which until not so long ago was a destination global investors flocked to. The measures they suggest include a reining in of the fiscal deficit, steps to boost foreign investment, and making loans cheaper for industry.

The Central Statistics Office's latest data has projected that India’s economy is set to grow by 5% in 2012-13, the worst since 2002-03, confirming fears of a widespread slowdown caused by low demand and investment.

Demand-side data indicate that private consumption and government expenditure will likely grow at a much weaker pace, investment activity will stay weak and import growth fall much more than export growth.

Despite the crisis, experts are optimistic on a turnaround.

“Based on our prognosis that non-agricultural GDP growth likely bottomed out in Jul-Sep 2012 and agricultural growth is also likely to be stronger because of a bumper winter crop, we expect GDP growth to be finally revised to 5.3% in 2012-13,” said Sonal Varma of broking and research firm Nomura.